Kiplinger Personal Finance: Polish and Protect Your Credit | Economic news

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To judge whether to give you credit and what rate to offer, lenders often look at your credit score, a three-digit number derived from your credit history.

Many versions of your credit score exist, and you may not have access to the one a lender is considering.

But you can get a good idea of ​​where you stand by using a free site like CreditKarma.comwhich provides VantageScore credit scores from credit reporting agencies Equifax and TransUnion, and FreeCreditScore.com, which provides a FICO score from the Experian credit bureau. Your bank or credit card issuer may also offer free score updates to customers.

Standard credit scores range from 300 to 850, and a score around 750 generally qualifies you for the best loan terms.

The most important thing you can do to get your score up the ladder is to pay all your bills on time. Another important factor is your credit utilization ratio – a percentage that reflects your credit card balance in proportion to your card limits. The lower the ratio, the better your score; aim to keep it between 20% and 30% or less.

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Finally, avoid opening several new credit card accounts at once.

Each card application creates a serious inquiry into your credit report, and multiple card applications in a short period of time signals to lenders that you may be a risky prospect as a borrower, lowering your score.

Review your credit reports. Credit reporting companies compile information about how you handled credit in your credit reports.

To annualcreditreport.com, you can view your report from each of the top reporting companies once a week until the end of 2022; thereafter, once every 12 months.

Regularly review your reports for errors or signs that an identity thief is at work, such as a new credit account you never opened or a collection account for a debt you don’t owe.

You can also use services that regularly analyze your reports and alert you to changes – Credit Karma and FreeCreditScore.com offer free credit monitoring and access to your reports.

If you find a problem, contact the lender or other company that provided the inaccurate information and file a dispute with the credit reporting company that posted the error on your report.

A credit freeze is the best way to thwart identity thieves trying to open accounts in your name. A freeze prevents lenders from viewing your credit report in response to an application for new credit, and it is free to place one on each of your reports. Before applying for a loan or a credit card, you can temporarily lift the freeze.

For a step-by-step guide, see kiplinger.com/kpf/freeze.

To visit Kiplinger.com to learn more about this and similar money-related topics.

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